-Caveat Lector- <<Note: Reference to www.polyconomics.com is made in the following article; memo(s) referred to are at the end. A<>E<>R>> >From wsws.org WSWS : News & Analysis : Europe : The Balkan Crisis IMF "shock therapy" and the recolonisation of the Balkans By Nick Beams 17 April 1999 During the Balkan Wars of 1912-13 Leon Trotsky wrote: "In politics as in private life there is nothing cheaper than moralizing--nothing cheaper and more useless. Many people, however, find it attractive because it saves them from having to look into the objective mechanism of events." In all the acres of print and millions of hours of television programming devoted to the Balkan crisis, beginning with the dismemberment of the Yugoslav federation in 1991, there has been virtually no coverage, much less analysis, of its underlying causes. The reasons for this silence are not hard to find, for such an analysis reveals that behind the propaganda smokescreen of "humanitarian" concerns for the fate of refugees and the victims of "ethnic cleansing," powerful economic processes are driving the escalating military intervention of the imperialist powers. In his analysis of the November 1995 Dayton accord on Bosnia-Herzegovina, the Canadian author Michel Chussodovsky noted: "[T]he break-up of the Yugoslav federation bears a direct relationship to the program of macro-economic restructuring imposed on the Belgrade government by its external creditors. This program, adopted in several stages since 1980, contributed to triggering the collapse of the national economy, leading to the disintegration of the industrial sector and the piecemeal dismantling of the welfare state. Secessionist tendencies, feeding on social and ethnic divisions, gained impetus precisely during a period of brutal impoverishment of the Yugoslav population."[1] In her 1995 study of the Balkan crisis, carried out for the Brookings Institute, Susan Woodward took issue with the Washington scenario, according to which "rogue states" had emerged in the post-cold war world "headed by 'new Hitlers' such as Saddam Hussein in Iraq and Slobodan Milosevic, who defied all norms of civilized behavior and had to be punished to protect those norms and to protect innocent people."[2] Neither was the break-up of Yugoslavia, she insisted, the result of the springing to life of ethnic tensions and conflicts that had been held in a kind of "deep freeze" during the previous 40 years. Rather, the real origins of the breakdown of civil and political order lay in the economic decline caused largely by the debt repayment program imposed by the International Monetary Fund and other international financial institutions. "More than a decade of austerity and declining living standards corroded the social fabric and the rights and securities that individuals and families had come to rely on. Normal political conflicts over economic resources between central and regional governments and over the economic and political reforms of the debt-repayment package became constitutional conflicts and then a crisis of the state itself among politicians who were unwilling to compromise."[3] The causal connection between the debt repayment program imposed by the IMF and the break-up of Yugoslavia is also the subject of a recent posting on the Polyconomics, Inc. web site (www.polyconomics.com) by the site's director Jude Wanniski, a former associate editor of the Wall Street Journal. Wanniski has forwarded a memo to US Secretary of State Madeleine Albright consisting of a report prepared by the then Polyconomics staff member Criton Zoakos in May 1993. "In 1987," Zoakos wrote, "the old Yugoslavia, with all its tragic failings, was still a functioning state. The International Monetary Fund then took over economic policy, implementing a number of all too familiar shock therapies: devaluation, a wage freeze, and price decontrol--designed on the Harvard/MIT economic textbook principles meant to drive the wage rate down to a level where it would be internationally competitive. As the economy contracted from this shock, revenues to the central government declined, triggering pressure from the IMF to raise taxes to balance the budget. ... "These centrifugal forces began to tear apart at the federation, with the richer provinces of Croatia and Slovenia objecting to being drained of resources by the poorer provinces. Just as the USSR splintered as the IMF browbeat the Gorbachev government into a ruble devaluation, Yugoslavia broke into pieces as ethnic and religious rivalries were reasserted in an attempt to control the rapidly shrinking pool of resources. ... "When the IMF shock therapy hit Yugoslavia, the initial form of social disorder was not ethnic friction but massive and repeated strikes and labor actions. As late as 1988, an enterprising US journalist employed in Belgrade had difficulty in finding ethnic passions and reported: ' "I would be a Serb, a Bosnian, anything--an Uzbekistani--I'd make my eyes slanted, if I'd have money," says a Belgrade taxi driver named Zoran, stretching the skin around his eyes to make the point.' Ordinary people turned into ethnic monsters only after all their options for a normal economic life were destroyed. 'Ethnic cleansing' arrived only after 'shock therapy' had done its work." Therefore, as Woodward rightly notes in her study "to explain the Yugoslav crisis as a result of ethnic hatred is to turn the story upside down and begin at its end."[4] The origins of IMF "Structural Adjustment" In order to begin at the beginning and reveal the economic interests of the major capitalist powers driving the Balkans crisis it is necessary to go back at least as far as the break-up of the post-war capitalist boom. With the collapse of the Bretton Woods monetary system in 1971-73, when US President Nixon removed the gold backing from the US dollar and initiated floating exchange rates between the major currencies, world capitalism was hit by a series of economic shocks. Oil prices quadrupled in 1973-74, leading to major imbalances within the global financial system as oil-importing countries faced massive balance of payments problems. The short-lived commodity-price boom of 1973-74 was rapidly followed by the global recession of 1974-75, the deepest to that point since the Depression of the 1930s. For the ruling classes of the imperialist powers these mounting economic problems were compounded by a rising movement of the working class--the 1974 miners' strike in Britain, the revolution in Portugal, the growing wages militancy in the United States, to name just some examples--coupled with a series of anti-imperialist struggles in the semi-colonial countries, culminating in the defeat of the United States in Vietnam in 1975. Accordingly, the bourgeoisie pursued a two-pronged strategy. In the major capitalist countries it relied heavily on the social democratic and Communist Party Stalinist apparatuses to bring the upsurge of the working class under control while pursuing a policy of Keynesian social welfare spending measures to soften the blows of the recession. At the same time it organised the "recycling" of petro-dollars through the international financial system in the form of cheap loans to the countries dependent on oil imports. But none of these policies resolved the underlying economic problems--they only bought time. The 1974-75 recession ended, but there was no return to the conditions of the post-war boom. The economic crisis assumed a new form of so-called stagflation--the persistence of high unemployment amid double-digit inflation. This situation was rapidly leading to a crisis in the international financial system. With inflation at record levels, the countries in receipt of "soft loans" were in effect enjoying negative interest rates. On the other hand, the capital stock of the banks was being eroded. A new policy was needed. It came in the form of the elevation of Paul Volcker to the position of chairman of the US Federal Reserve Board in 1979. After rewriting the Carter administration's budget of that year, Volcker implemented a high interest rate policy to "squeeze inflation" out of the system. In effect, this program, which saw interest rates leap to as high as 20 percent, represented a massive transfer of wealth into the hands of the banks and major financial institutions. Whereas in the mid-1970s, the bourgeoisie had sought to buy time, by the opening of the 1980s it felt that conditions had sufficiently stabilised for a new initiative. This took the form of an offensive against the social conditions of the working class in all the major capitalist countries, coupled with a program aimed at the impoverishment of the indebted nations. Countries which had borrowed heavily in order to pay for oil imports were hit on two sides. On the one hand, real interest rates on loans rapidly escalated, while on the other prices for commodities used to earn foreign exchange to repay these debts fell rapidly, as the recession of 1981-82 took hold. The tightening of this vice-like grip led to the Mexican debt crisis of 1982 followed by the initiation of so-called Structural Adjustment Programs (SAPs) by the IMF. Henceforth, indebted countries would only receive new loans on condition that they undertook a major "restructuring" of their entire economies, based on the slashing of public sector-funded national development projects and social welfare measures. The aim was to open the entire world to the domination of the major industrial corporations and financial institutions. Summing up the effect of these policies in 1992, a former official of the Inter-American Development Bank, Jerome I. Levinson, noted: "[To] the US Treasury staff ... the debt crisis afforded an unparalleled opportunity to achieve, in the debtor countries, the structural reforms favored by the Reagan administration. The core of these reforms was a commitment on the part of the debtor countries to reduce the role of the public sector as a vehicle for economic and social development and rely more on market forces and private enterprise, domestic and foreign."[5] These programs had a devastating impact. It has been calculated that between 1984 and 1990 "developing" countries operating under SAPs transferred $178 billion to Western commercial banks, prompting a former official of the World Bank to remark: "Not since the conquistadors plundered Latin America has the world experienced such a flow in the direction we see today."[6] Economic devastation in Yugoslavia The effect on Yugoslavia was no less disastrous. The Yugoslav foreign debt, which stood at $2 billion in 1970, rose to $6 billion in 1975. By 1980 it stood at $20 billion, representing over a quarter of national income, with debt servicing taking up some 20 percent of export revenue. Debt servicing and repayment led to an increased fracturing of the federal republic. Most of the industrial development had taken place in the north of the country, in Croatia and Slovenia, while the south supplied raw materials. As the relative prices of raw materials fell, so the economic inequalities between the republics increased, leading to increased tensions and demands from the northern republics for greater autonomy. As the federal government was pressured by the IMF and other financial institutions to reduce foreign debt by expanding exports, the resultant diversion of production from home consumption led to a steady reduction of living standards throughout the 1980s. Between 1979 and 1985 the real personal income of workers in the "social sector" had fallen by 25 percent and by 1989 it is estimated that some 60 percent of Yugoslav workers lived at or below the minimum level guaranteed by the state. The standard of living fell by 40 percent from 1982 to 1989. This forced contraction of home consumption did bring about a fall in the foreign trade deficit from $7.2 billion to $0.6 billion between 1979 and 1988. But the rescheduling of debt meant that the debt was reduced by only $1 billion and by 1987 had risen once again to more than $20 million. Describing the operations of this economic treadmill, the British economist Michael Barratt Brown wrote: "There seemed to be and indeed there was no hope. The same remedy was being administered to all the countries in debt in the Third World and in the communist world alike. 'Export more and pay off your debts!' was the chorus of the World Bank and the IMF; and the more the debtor countries exported of the same, often mainly primary, products the more their prices in the world markets fell, while the prices of their imports from the industrialised countries and their rates of interest continued to rise."[7] With the disintegration of the Stalinist regimes in Eastern Europe in 1989, the IMF restructuring program accelerated. The basic objectives for both Eastern Europe and Yugoslavia had already been formulated in a US National Security Decision Directive in 1982 which called for "expanded efforts to promote a 'quiet revolution' to overthrow Communist governments and parties" and for the integration of Eastern Europe into a market-oriented economy.[8] The impact on Yugoslavia of the IMF dictates is indicated by the following figures. For the period 1966-79 the increase in industrial production had averaged 7.1 percent per annum. After the first phase of macro-economic reform, it fell to 2.8 percent in the period 1980-87, falling to zero in 1987-88 and then collapsing to -10.6 percent in 1990. But even more severe measures were to come. In January 1990, an agreement signed with the IMF required expenditure cuts amounting to 5 percent of gross domestic product. As Chussodovsky's account of this process details, the results were nothing short of catastrophic. "While earnings had been eroded by inflation, the IMF ordered the freeze of wages at their mid-November 1989 level. Despite the pegging of the dinar to the deutschmark, prices continued to rise unabated. Real wages collapsed by 41 percent in the first six months of 1990. Inflation in 1990 was in excess of 70 percent. In January 1991, another devaluation of the dinar of 30 percent was carried out, leading to another round of price increases. Inflation was running at 140 percent in 1991 soaring to 937 percent and 1134 percent respectively in 1992 and 1993. "The January 1990 economic package also included the full convertibility of the dinar, the liberalisation of interest rates and further reductions in import quotas. The creditors were in full control of monetary policy: the agreement signed with the IMF prevented the federal government from having access to credit from its own Central Bank (the National Bank of Yugoslavia). This condition virtually paralysed the budgetary process and crippled the ability of the federal state to finance its economic and social programs. Moreover, the deregulation of commercial credit alongside the banking reforms was conducive to a further collapse of investment by the socially-owned enterprises. "The freeze of all transfer payments to the republics had created a situation of 'de facto secession'. The implementation of these conditions (contained in the agreement signed with the IMF) was also part of the debt-rescheduling arrangements reached with the Paris and London clubs [the major Western financial institutions]. The IMF-induced budgetary crisis had engineered the collapse of the federal fiscal structure. This situation acted in a sense as a fait accompli, prior to the formal declaration of secession by Croatia and Slovenia in June 1991. Political pressures on Belgrade by the European Community combined with the aspirations of Germany to draw the Balkans into its geo-political orbit had also encouraged the process of secession. Yet the economic and social conditions for the break-up of the federation resulting from ten years of 'structural adjustment' had already been firmly implanted."[9] One of the major demands of the IMF was that the federal government and financial authorities should cease funding "loss-making" enterprises. In 1989 some 248 firms were liquidated and 89,400 workers were laid off. But more was to come. In the first nine months of 1990 a further 889 enterprises with 525,000 workers were subjected to bankruptcy proceedings, with the largest concentration of such firms in Serbia, Bosnia-Herzegovina, Macedonia and Kosovo. In September 1990, the World Bank estimated there were another 2,435 "loss-making" enterprises, with a combined workforce of 1.3 million workers, out of a remaining total of 7,531. As Chussodovsky notes: "Bearing in mind that 600,000 workers had already been laid off by bankrupt firms prior to September 1990, these figures suggest that some 1.9 million workers (out of a total of 2.7 million) had been classified as 'redundant'. The 'insolvent' firms concentrated in the energy, heavy industry, metal processing, forestry and textiles sectors were among the largest industrial enterprises in the country representing (in September 1990) 49.7 percent of the total (remaining and employed) industrial workforce."[10] A new colonisation What these economic statistics underscore is that the current intervention by the NATO powers is nothing other than the continuation by other, that is, military means of the agenda carried out in the preceding period--the destruction of all the previous economic and social development in Yugoslavia and the transformation of the entire region into a kind of semi-colony of the major capitalist powers. Nowhere is this process more clearly seen than in Bosnia-Herzegovina. Under the Dayton accords of November 1995, these aims were written into the constitution of the new "republic". The so-called High Representative appointed by the US and the European Union was given full executive power with authority to overrule the governments of both the Bosnian Federation and the Bosnian-Serb Republika Srpska. Economic policy was placed in the hands of the major international financial institutions. The constitution stipulated that the first governor of the Central Bank of Bosnia Herzegovina was to be appointed by the IMF and "shall not be a citizen of Bosnia and Herzegovina or a neighboring State ..." Furthermore the Central Bank was not allowed to pursue an independent economic policy and for the first six years "may not extend credit by creating money, operating in this respect as a currency board." That is, it could only issue paper currency where this was fully backed by holdings of foreign currency. International loans were not allowed to finance economic reconstruction but have been used to fund the military deployment under the Dayton agreement as well as repaying debts to international creditors.[11] Having secured the effective recolonisation of Bosnia Herzegovina, the imperialist powers, with the US in the lead, have now moved to extend this process to the rest of Yugoslavia. As the publication of the Rambouillet agreement makes clear, the NATO military intervention was never intended to be confined to Kosovo but envisaged the occupation of the whole of Yugoslavia. In short, behind the propaganda barrage, the "objective mechanism of events" is nothing else but the drive to recolonise the entire region. Notes 1. Michel Chussodovsky, The Globalisation of Poverty pp. 243-244 2 .Susan Woodward, Balkan Tragedy p. 7 3. op cit p. 15 4. Woodward op cit p. 18 5. cited in Doug Henwood, Wall Street pp. 294-295 6. cited in Asad Ismi, "Plunder With a Human Face", Z magazine February 1998 7. Michael Barratt Brown, "The War in Yugoslavia and the Debt Burden" in Capital and Class No 50, 1993 8. Chussodovsky op cit p. 244 9. Chussodovsky op cit pp. 246-247 10. Chussodovsky op cit p. 251 11. Chussodovsky op cit p. 256 See Also: How the Balkan war was prepared Rambouillet Accord foresaw the occupation of all Yugoslavia [14 April 1999] Kosovo "freedom fighters" financed by organised crime [10 April 1999] Behind the war in the Balkans A reply to a supporter of the US-NATO bombing of Serbia [8 April 1999] The United States and the war in the Balkans: On the road to catastrophe [8 April 1999] Marxism, Opportunism and the Balkan Crisis [Statement of the ICFI, 7 May 1994] War in the Balkans [WSWS Full Coverage] Top of page Readers: The WSWS invites your comments. Please send e-mail. ---------------------------------------------------------------------------- ---- Copyright 1998-99 World Socialist Web Site All rights reserved ~~~~~~~~~~~~ >From www.polyconomics.com (Albright & Kemp Memos + "About") April 8, 1999 The IMF and the Balkan Crisis (May 5, 1993) Memo To: Secretary of State Madeleine Albright From: Jude Wanniski Re: A Polyconomics Report, Six Years Ago When the Clinton administration began six years ago, it came onto the scene during the middle of a chess game in the Balkans that had begun several years earlier. Perhaps your predecessor, Warren Christopher, had a grasp of how the game began, but I doubt he took the trouble to understand the forces that wormed their way into the Balkans that led to the rot back then... and today. Polyconomics took the trouble to look back to the origins of the ethnic strife that began in 1987, discovering the destabilizing influence of the International Monetary Fund as the primary culprit. Criton Zoakos, then of my staff, wrote the following letter to our clients on May 5, 1993. It is one of many pieces we've written over the years on the continuing Balkan crisis. On the theory that if you don't know why something broke, it becomes difficult to fix and stay fixed, I send you this copy of our 1993 letter and hope it helps you realize that where swords will not work in that part of the world, ploughshares will. * * * * * In 1987, the old Yugoslavia, with all its tragic failings, was still a functioning state. The International Monetary Fund then took over economic policy, implementing a number of all too familiar shock therapies: devaluation, a wage freeze, and price decontrol -- designed on the Harvard/MIT economic textbook principles meant to drive the wage rate down to a level where it would be internationally competitive. As the economy contracted from this shock, revenues to the central government declined, triggering pressure from the IMF to raise taxes to balance the budget. As always, this led to a further weakening of the once strong Yugoslav new dinar, which in 1986 was still worth $22. These centrifugal forces began to tear at the federation, with the richer provinces of Croatia and Slovenia objecting to being drained of resources by the poorer provinces. Just as the USSR splintered as the IMF browbeat the Gorbachev government into a ruble devaluation, Yugoslavia broke into pieces as ethnic and religious rivalries were reasserted in an attempt to control the rapidly shrinking pool of resources. As in Russia today, where the IMF textbook shock therapy is again being used, the peoples' money capital had been extinguished and the population left impoverished. On average, the dinar was devalued by one order of magnitude each year. As in Russia, inflation was driven by the price of oil being pushed ever higher in a fruitless attempt to reach world levels. By December 1989, the dinar had fallen in value by 200 times, to 11 cents from $22. Hyperinflation became evident in December 1991 as the dinar fell to one-half cent of value by the following summer, to the present 0.003 cents. Hyper-unemployment accompanied the hyper-inflation. [In Russia, the ruble has now lost 200 times its value of 1987, roughly where the Yugoslav dinar was in December 1989, not quite yet at the point of a hyperinflation that would in all likelihood produce a breakdown of civil authority.] When the IMF shock therapy hit Yugoslavia, the initial form of social disorder was not ethnic friction but massive and repeated strikes and other labor actions. As late as 1988, an enterprising U.S. journalist deployed in Belgrade had difficulty finding evidence of ethnic passions and reported: " 'I would be a Serb, a Bosnian, anything - an Uzbekistani - I'd make my eyes slanted, if I'd have money,' says a Belgrade taxi driver named Zoran, stretching the skin around his eyes with his fingers to make his point." Ordinary people turned into ethnic monsters only after all their options for a normal economic life were destroyed. "Ethnic cleansing" arrived only after "shock therapy" had done its work. Finally, on December 14, 1992, when dinar devaluation reached the IMF's theoretical ideal of infinite percent with the dissolution of the state that used to issue dinars, civilized life ended and was replaced by a "natural state of war," as political philosopher John Locke predicted would invariably happen when organized government disappears from a people's life. Now, the same Western intellectuals who cheer IMF shock therapies propose the further extinction of the last remnants of organized government in Serbia under the blows of the proposed allied air strikes. This will produce not less violence but more -- precisely because of the further extinction of organized power. Once this happens, the United Nations and others will discover that instead of trying to stop a war of tanks, artillery batteries, aircraft, and chains of command, they will have to deal with a war in which crazed populations kill each other with knives, clubs or their bare hands. The logic of the proposed air strikes falsely presumes that the crippled Serbian government in Belgrade has the power to impose its will on such Bosnian Serb leaders-of-the-moment as Radovan Karadzik and that, in turn, quixotic figures like Karadzik have the power to impose their will on the rank-and-file of armed Bosnian Serbs. In fact, Belgrade and Karadzik command attention from the armed Serbian rank-and-file only when they serve the logic of the post-civilization "state of war." Karadzik, as the Bosnian Serbs' putative leader, signed the May 2 Athens accord accepting the Vance-Owens Plan only 48 hours after he had called it "suicidal for the Serbian nation" during an interview with the Deutsche Presse Agentur. For most of April, Karadzik had tried to convince the Bosnian Serb parliament to accept the plan, although suicidal, by arguing that the alternative, i.e., systematic allied bombing of neighboring Serbia, would destroy the only still existing organized state of the Serbian nation. Following the Athens agreement, battlefield reports from throughout Bosnia-Herzegovina indicate that Serbian field commanders do not consider themselves bound by Karadzik's signature. The fighting will continue not until all sides complete their "ethnic cleansing," but until organized government is restored. In the meantime, the other shoe will fall during May 15 and 16, when the Serbian population in Bosnia holds its referendum on the Vance-Owens Plan -- which is widely expected to be soundly rejected. On what grounds should the United Nations ignore the Bosnian Serbs' referendum? When the Croatian people held their referendum for independence on May 19, 1991, the world community bowed to their will and recognized Croatia; when the Slovenians did the same, the U.N. again complied. Why is the Clinton Administration on the Serbs' case, pretending that Croats and Bosnians are innocent victims? While media headlines throughout April were filled with preparations for military action against Serbs, the greatest atrocities -- according to reports from the International Red Cross -- were perpetrated by Bosnian Muslims against Croats. If the Clinton Administration bombs Serbs and arms Bosnian Muslims as it proposes, the levels of violence will only escalate. U.N. ground troops will be confronted with 10 million Serbs settling down to long-term partisan warfare, Bosnian Muslims reinforced by battalions of Iranian-armed and financed mujaheddin, and vengeful Catholic Croats. The entire Balkan peninsula will be one monstrously large Beirut at the mercy of anarchistic ethnic and religious militias. The Serbs will hate the U.N.-U.S. peacekeeping force because of the bombings; the Croats will hate it because it armed the Bosnian Muslims; the Bosnian Muslims will also hate it because they will be under the sway of Muslim fundamentalist mujaheddin armed and financed by Iran. Our presence there will be similar to the U.S. Marines' presence in Beirut in 1982. Our moral outrage at the atrocities Beirutis were perpetrating against each other was no less than our outrage at the present Balkan atrocities. Yet, Ronald Reagan, a proud President under whose watch Soviet Communism was defeated, saw no choice but to leave when we brought home more than 200 Marines in body bags. Sen. Dennis DeConcini [D-NM], chairman of the Senate Intelligence Committee and an advocate of the use of force in Bosnia, appeared Monday on CNN's "Crossfire," rejecting the argument of Rep. Robert Torricelli [D-NJ] that we should not use force unless we know where that will lead. In a letter to DeConcini yesterday, Jude Wanniski noted: "Bob Torricelli seems closer to reality in arguing it is a slippery slope. The last thing we should do is put troops on the ground. Leave it to some madman to get his hands on a tactical nuclear weapon and we'd lose as many troops in an afternoon as we did over several years in Vietnam." Rather than playing futile military games, we believe the only constructive route is to undo the destruction wrought by the IMF's shock therapy. The starting point, we have suggested, is to reverse the IMF policies that have pointed Russia and the rest of the ruble area toward economic and political disintegration. With the collapse of communism in Moscow two years ago, The Wall Street Journal asserted editorially that the IMF was now the single most destructive force on earth. The Fund, for the most part controlled by the international banks through their influence at the U.S. Treasury, is truly the satanic force that precipitated the crisis in the Balkans. Until it is somehow neutralized, ethnic cleansing, atrocities and civil war around the world will continue to lay claim to America's blood and treasure. Criton Zoakos [Clients: You have our permission to circulate this report beyond your institution if you wish. We are having an extremely difficult time getting our perspective on Bosnia and Russia broadcast through established media. JW] April 21, 1999 Kemp to Quayle on Kosovo (April 6) Memo To: Political commentators From: Jude Wanniski Re: Leading on Kosovo Following is a memo Jack Kemp of Empower America sent to former Vice President Dan Quayle earlier this month. Kemp apparently sent the memo to some of the GOP leaders on Capitol Hill and Robert Novak asked Quayle about it on his CNN show last Saturday (4/17/99). We linked to that interview Tuesday and you can catch up with it today. The Kemp memo, you will see, is remarkable in its length and harshness in its criticism of the bombing campaign. Kemp has not endorsed Quayle's presidential candidacy, but they appear to see eye-to-eye on the Balkans. * * * * * Memorandum To: Dan Quayle From: Jack Kemp Subject: Leading on Kosovo Thanks for calling Sunday. Here's the memo you asked for on my "take" on the situation in Kosovo: The road to hell is paved with good intentions, which is where we are surely headed in Yugoslavia unless a Republican leader emerges to clear a path toward a more positive outcome. The fact that so many leading congressional Republicans shared in the design of the administration's failed policy tells us that there is little room for partisan criticism of the President, but enormous room for constructive criticism. Because you are a serious candidate for the presidency yourself, and I've taken myself out of the competition, it could be that you are the man to fill this crying need -- to prevent what could easily become the biggest American foreign policy failure since the Bay of Pigs. Early on, regrettably, a few leading congressional Republicans bought into the President's poorly conceived strategy, giving it a gloss of bipartisianship by voting to support the bombing. By doing so, they put us on the path to war and put the vast majority of Republicans in a very tight corner. A number of the other Republican presidential contenders have either joined in support of intervention, remained silent, or straddled the issue with vague statements. Now, having been dragged into a genuine foreign policy debacle, the American people find themselves in a quandary. We not only blundered to this point through a bipartisan miscalculation. We also face a slippery slope that promises to end in much greater violence, human suffering and loss of life. Will we, as I believe we must, have the courage and the ingenuity to cut the devastation on both sides, stop the ill-conceived war immediately and help construct a diplomatic solution? And if we do, how can we get out without rewarding Milosevic's despicable behavior and without destroying our credibility in the process? Or, will we be lured deeper into a bloody quagmire under the delusion that we have no choice but to fight our way out, no matter what the costs in human life? Politically, these questions are so tough for Republicans, and emotionally, the "fight-response" is so powerful when our troops are in harm's way that most of our colleagues will fail to see a way out of the morass. They will find themselves sucked deeper into war. That's why I believe you can help lead America out of the cul-de-sac into which we've stumbled. For a presidential contender, what I am suggesting will be risky. It will take courage to stand against this war and to show America where her long-term self-interests really lie. It will, in short, require a vision of what America's foreign policy should look like in the 21st Century. There are only two serious reasons for the U.S. ever to have considered transforming NATO from a successful defensive alliance into an agent of offensive action. The weaker of the two reasons is that humanitarianism requires it. Kosovo -- at least before NATO's bombing turned it into a major humanitarian catastrophe -- has been a humanitarian disaster but no where near the same magnitude of scores of other such civil wars taking place around the globe. If humanitarianism justifies and requires our military intervention in Kosovo, it means that we would truly become the policeman of the world. Humanitarianism is a slippery slope into war and as a general proposition should never be the sole, or even the primary, reason we risk spilling American blood on the battlefield. The stronger of the two reasons for is that we put our credibility behind the transformation of NATO into a police force and now must proceed to victory at all costs in order to preserve our credibility. That is, the consequences of not winning are too serious to endure. Henry Kissinger believes the bombing was wrong but that once begun there is no retreat; that unless we go into Kosovo with an occupying army to guarantee Kosovar independence we will legitimize the massive ethnic cleansing stimulated by the bombing and thereby abandon our credibility. Kissinger states forthrightly that he believes we have no choice but to violate Serbian sovereignty, wrench Kosovo away from Serbia and set it up as an independent protectorate of NATO. By so doing, Kissinger acknowledges we will be assuming for ourselves the same despised role played by the Ottoman and Austro-Hungarian empires in the Balkans. Yet, in spite of so undesirable an outcome, Henry still believes we must continue along this course because he can conceive of no other escape from the President's disastrous intervention. Several Republicans in addition to Kissinger, all of whom I hold in equally high regard (such as Bob and Elizabeth Dole, Steve Forbes, George W. Bush and John McCain), also have concluded that no matter how weak the case for war in Kosovo may be on the merits, we are now inextricably involved, and we must, therefore, do whatever is necessary militarily to "win." We are in the bramble; it is impossible to back out gracefully. Therefore we must fight our way out the other side. Some have suggested that this implies a relentless bombing campaign to force Milosevic to give up Kosovo. Others insist that a massive ground assault is necessary to throw the Serbs out of Kosovo. Some contend that it would be safe and sufficient to arm the KLA insurgency so the Kosovar Albanians can carry out a guerilla war and win their independence or fight the Serbs to a standstill inside Kosovo -- a form of "Albanianization" of the war. But Dan, as difficult and perilous as the Republican Establishment makes stopping the war sound, I am convinced that continuing the war is immeasurably more dangerous. The false premise on which the Establishment's line of reasoning rests is that peace around the world hangs on whether or not people believe America is prepared to go to war to preserve it. World peace cannot rest on American threats of violence, bombs at midnight or the "bully" tactics of President Clinton. If this is where American foreign policy is heading in the next century, we are in big trouble. Of the three war options in Kosovo, arming the KLA looks most attractive on its face because it would seem to permit us to continue the war from afar long after we have run short of cruise missiles. I believe, however, that this strategy rests on a false premise, which mistakenly analogizes Kosovo to our successful efforts during the Cold War to arm other resistance groups who were fighting Communism. The logical flaw in drawing this analogy is that the successful efforts in Latin America, Africa and Afghanistan worked precisely because they involved a calculated strategy of siding with one faction in a civil war to combat a common enemy that threatened the U.S. directly -- Communism. We threw in our lot with some rather nasty people during the Cold War, not because we were particularly interested in seeing them rule but rather because we had a very definite and well defined interest in preventing Communism from spreading anywhere else around the world. We face no common enemy in the Balkans. In arming the KLA -- a group funded by drug money that the State Department contends has committed terrorist acts -- we would run a huge risk of fanning the flames of Muslim fundamentalism against a former Christian ally. Israel' s foreign minister, Ariel Sharon, warns that there are Hezbollah people, mujahidin forces and Bin-Laden people, all working with the KLA. Arming the KLA is the fastest way I know to turn Bill Clinton's disingenuous warnings about a Balkan "tinder box" into a self-fulfilling prophecy. Arming the KLA would almost certainly destabilize the region even further -- not to mention the horrible precedent it would set. If we become the KLA's arms merchant, should we also assist the Tibetans against Beijing, the Chechans against Moscow, the IRA against London, the Kurds against Turkey, Quebec against Canada and the Basques against Madrid? See where this goes? It would lead to enormous pressure to enter into every "war for independence" that came along. It is Wilsonianism run amok and the logical extension of an emerging Clinton doctrine. I believe the way out of this box begins, but does not end as the Clinton Administration insists, with the Rambouillet proposal. I believe we must elicit Russia's assistance to transform the Rambouillet proposal into a workable framework for peace. The President insists that the only way out of his fool-hearty war is to embark on "relentless bombing" to impose a fatally flawed peace. Instead, if we would stop the bombing and listen carefully to the signals being sent by the Serbian government, I believe we would hear Belgrade accepting three of the four Rambouillet conditions: 1.) a cease fire with withdrawal of Serbian military forces from part or all of Kosovo; 2.) some form of self government for the Kosovar Albanians; and 3.) allowing the refugees to return to their homes. The one condition rejected by Serbia, the same condition that doomed the Rambouillet proposal from the outset, is the stationing of NATO troops in Kosovo as a peacekeeping force. Dropping this fourth condition is, I believe, the key. Instead of insisting on stationing NATO troops in Kosovo, I believe a combined force made up of the OSCE monitors that left in the wake of the war and other military forces acceptable to Belgrade (Russian for example), would allow Serbia to retain its sovereignty at the same time it gave NATO, and more importantly the refugees, a high degree of certainty that the ethnic cleansing will not recur. A fifth condition touted by a growing number of people is removal of Milosevic from office. I agree with Henry Kissinger, in this case, that such a condition is unnecessary and likely to be counterproductive. Our greatest hope for peace in the Balkans is an economically prosperous region.... We must prevent bad economic policy from undermining any political settlement that emerges. It was the IMF that created a tinderbox out of the Balkans at the end of the Cold War. The result of the IMF's deadly economic medicine of the late 1980s has been to bankrupt the entire Yugoslav economy, destroy the currency and unemploy the people. We should be doing everything possible to prevent the IMF from re-entering the region and undermining efforts to rebuild the economies. The Joint Chiefs resisted this war because they knew that no fundamental U.S. interests were at stake, and they understood better than anyone the impossible demands the Clinton Administration was placing on the military. The military professionals also understand that no military "solution" can ever hope to solve what is, at heart, both an economic and a political problem. Ronald Reagan won the Cold War not only because of his nerve in confronting the Evil Empire but also because of his ability to recognize a mistake like the one he made in Lebanon and reverse course before he made a bad situation worse. What would Ronald Reagan do in Kosovo? 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